MAC: Mines and Communities

Future of BHP coal mines in Indonesia hinging on mining rules revision

Published by MAC on 2015-11-01
Source:, Reuters

Future of BHP coal mines in Indonesia hinging on mining rules revision

Cecilia Jamasmie

30 October 2015

Mining giant BHP Billiton may reconsidering its push into coal mining in Borneo, depending on the what comes out of the Indonesian government ongoing review of the sector’s regulations.

Such revisions, Reuters reports, include mandatory divestment and contract extensions, which could either support or discourage BHP’s future investment decisions in the country.

BHP began mining at the Haju coking coal mine during the September quarter, in the first step toward what is expected to be a wider presence in the region, under the company’s IndoMet Coal project, in the Central Kalimantan province.

The project has already raised concerns among environmentalists, some of which were addressed by BHP executives at the company's annual meeting of shareholders in London earlier this month.

Opponents claim that IndoMet is too close to a significant orangutan population in the Upper Barito Basin. According to World Wild Life (WWF) that population has declined by over 50% in the past 60 years, and its habitat has been halved over the past two decades.While BHP have said that no orangutans have been found on its leases, it helped relocate 280 orangutans found nearby to other parts of Kalimantan.

Haju will initially produce about 1 million tonnes of coal a year, while the larger IndoMet complex is believed to have potential to produce around 5 million tonnes of coal per year.

BHP pins future of Indonesian coal mine on new rules

By Fergus Jensen

30 October 2015

JAKARTA - The world's top exporter of coking coal, BHP Billiton , said plans to develop a massive mine in Borneo will hinge on a revision of Indonesia's mining rules, including on compulsory divestment and contract extensions.

BHP in September said it had started mining at the Haju mine, part of the first stage of the IndoMet Coal project, in the forested Central Kalimantan province.

"As we continue to cautiously proceed with a small scale mine at Haju, a regulatory regime with certainty will be essential in supporting future investment decisions," a BHP spokeswoman said in an email.

BHP is continuing to evaluate the potential for larger scale developments at IndoMet and has already received buyer interest in the coal, she said.

The project, in which Indonesia's Adaro Energy also holds a stake and is estimated to have at least 1.27 billion tonnes of resources, has come under fire from environmental groups, with BHP fending off criticism at its annual meeting in London last week.

"If we were to leave ... it is unlikely that these areas would be set aside for conservation," Chairman Jacques Nasser told shareholders, noting that Indonesia wanted to develop the area, regardless of which company did it.

"The area of interest has had accelerated development pressures over the last 20 years and it is not the pristine wilderness it was two decades ago," he said.

Discussions on the rules on BHP's Coal Contracts of Work were ongoing, and the company expected these would not be finalised until the Indonesian government completed a review of regulations, the spokeswoman said.

Adhi Wibowo, director of coal at Indonesia's energy ministry, said while the area was home to orangutans, BHP had received environmental permits and the government would help it get further forest-use permits if necessary.

"There should be no more obstacles," he told Reuters, adding if they did not want to develop it they could return the concession.

But he said the government was still reviewing rules on divestment and contract extensions, adding "we are waiting for parliament."

Indonesia's mining rules are sometimes subject to debate because in some cases they overlap with contractual requirements, PwC mining analyst Sacha Winzenreid said.

The fact that this project covered seven contracts of work, each held by a separate legal entity, meant negotiations may be particularly difficult, Winzenreid said.

According to Friends of the Earth Indonesia (WALHI), the concessions "lie within the remote and largely undisturbed forests of Central Borneo, forests recognised globally for their biodiversity."

As well as being home to indigenous Dayak groups, orangutans, pygmy elephants, clouded leopards, proboscis monkeys and numerous other rare and endangered species also lived in the forests, it said in a 2014 report. (Additional reporting by Wilda Asmarini; Editing by Ed Davies)


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